Fannie Mae Ditches 620 Credit Score Requirement

Fannie Mae has announced it will remove the specific minimum credit score requirement for loans processed through its automated underwriting system, Desktop Underwriter (DU), effective for new loan case files created on or after November 16, 2025. 

Detailed Summary of the Policy Change

• Removal of the 620 Minimum Score: The previous requirement for a minimum credit score of 620 for single-borrower loans (or minimum average median score of 620 for multiple borrowers) will be eliminated.

• Shift to Holistic Risk Assessment: DU will now use its comprehensive model to assess eligibility based on a wider range of credit and non-credit factors, rather than a single minimum score. These factors include payment history (potentially including rent and utilities through alternative data), income, debt levels, borrower reserves, equity, and property characteristics.

• Lender Responsibility Remains: Lenders must still obtain credit scores for their records, but the DU automated approval will not depend on meeting a specific score number.

• Goal of Expanding Access: This change, similar to one by Freddie Mac, aims to help creditworthy borrowers with limited credit history qualify for homeownership.

• Alternative Data and Credit Models: The policy coincides with the FHFA allowing VantageScore 4.0, which incorporates alternative data and can score individuals with limited credit history, alongside FICO.

• No Relaxation of Underwriting Standards: The FHFA clarifies that this is a process update to accommodate multiple credit models and is not intended to weaken underwriting standards. 

This change offers a more flexible, data-driven method for evaluating a borrower's repayment capacity, moving past a single credit score threshold. 

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